Switzer Super Report: Predictions for 2013

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By Peter Switzer, Switzer Super Report

Bob Doll used to be chief equity strategist at BlackRock, the biggest fund manager in the world but now is at Nuveen Asset Management. He has been a legend of the US stock market and his predictions have been closely watched over the years.

Some critics say he has not been performing well lately but I relied on him, when too many experts were super negative on stocks in the 2009 — he even gave me guts in 2008 to look for the positives that could turn the market around by March 2009.

In fact I interviewed him, when I took my Sky News Business program to New York in 2010, in the BlackRock boardroom which had a table as long as a 25-metre swimming pool!

A good year

This is what he predicts for this year and I will throw in my two pence worth as well.

He predicts a new all-time high for the S&P 500 “some time this year”, which is only 6% away. I think the US market will do better than this, but there will be some moments when I will have doubters — I could even doubt it! Or maybe not — but I reckon the Yanks do well and we even do better.

He believes large multi-national companies that rely on emerging economies will do well this year. This augurs well for local companies such as BHP Billiton ((BHP)) and Rio Tinto ((RIO)) if he is right and once again I support his view on up and coming economies. The IMF also believes ASEAN countries will return to pre-GFC growth rates and this means more modernization and that means more steel which helps coal and iron ore.

Top sectors

On the sectors, he is pro-cyclical and if we see a big year in stocks, which is due, then these sorts of companies are likely to do well. Doll likes Tech companies, industrials and those with positive cash flow to buy stocks and raise dividends.

He thinks banks and financials will do OK, but “won’t lead the race” and I think that’s a good call for Australia. I would buy financials on any silly dip or maybe a takeover target.

Improving growth

He expects US and global growth will be better in 2013 and I support this view but importantly he told CNBC that “the perceptions of growth” will improve so businesses and investors will be more confident about the future of their operation and where P/Es are going, that is up!

This is a big issue for 2013 and we will see this here in Australia as well despite the Treasurer, Wayne Swan, backing away from his surplus promise, which will be good for growth and even with an election year ahead.

Less fear this year

He is arguing there will be a “little less fear in 2013” and we will see things like more M&A activity, which not only reflects more confidence but helps share prices.

He is cautious about being too cautious on defensive stocks but that could provide value for the long-term player who wants dividends more than capital gain, while they would cop it if it comes along.

He thinks dividend increases will be at a double-digit rate which looks huge for the likes of Telstra ((TLS)) here and so I would rule this one out as a general prediction but many cyclical companies that have not even paid dividends lately could easily return dividends this year. I expect better dividends from many companies if the stock prices are rising and economic growth picks up over the year.

On interest rates

Doll also expects long-term interest rates to rise in the USA. In Australia I think we will see rates fall for home loans, however longer term rates could sneak up but only slowly as we get to year’s end. For this to happen we would need to see a big spike in stocks, which is definitely possible.

Bob Doll might have had some years where he has not performed as well as other fund managers and equity strategists but his history is there to look at and as a legend of the stocks game I’m prepared to take his tips, especially when they mirror my own views!

Peter Switzer is the founder and publisher of the Switzer Super Report, a newsletter and website that offers advice, information and education to help you grow your DIY super.

Important information: This content has been prepared without taking account of the objectives, financial situation or needs of any particular individual. It does not constitute formal advice. For this reason, any individual should, before acting, consider the appropriateness of the information, having regard to the individual’s objectives, financial situation and needs and, if necessary, seek appropriate professional advice.

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